Finance, Applied Econometrics PRELIMINARY AND INCOMPLETE

Abstract In this paper we model and test how general health conditions affect financial portfolio choices, conditional on the presence of a National Health System (NHS) and its level of coverage. We further propose a measure of risk of expenses for future health shocks in order to test whether portfolio decisions have a more “myopic ” or “forward-looking ” orientation. To this end, we use data taken from the first wave of SHARE to compare the participation decision of European elderly households in presence of different NHS. The results are consistent with our hypothesis, i.e. that portfolio choices are different across households who shares the same health status but live in countries with higher or lower protection via NHS. More specifically in countries without a protective NHS, a worse current perceived health status sensibly reduces the probability of holding risky assets, while in those with a protective NHS, current health status does not seem to affect portfolio choices. Furthermore, we find evidence of a weak forward-looking attitude in shaping household portfolio decisions